Connecting With Technology SML Dogs
Yield (dividend/price) results from here verified by Yahoo Finance were calculated as of January 12, 2015 for Small, Mid, & Large cap Technology stocks. Small cap firms were valued at $200M(illion) to $2B(illion); Mid cap firms were worth $2B to $10B; Large caps were valued above $10B. Those yield results led to three actionable conclusions discussed below.
50 For the Money
Since late 2011 this report series has applied dog dividend methodology to uncover possible buy opportunities in each of eight major market sectors listed by Yahoo Finance: basic materials (BasMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes). In the past two years, the series expanded to report (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1-yr. target projections.
This article was intended to reveal bargain stocks to buy and hold up to one year. See Dow 30 article for explanation of the term "dogs" for stocks reported based on Michael B. O'Higgins' book "Beating The Dow" (HarperCollins, 1991), now named Dogs of the Dow. O'Higgins' system works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates expanded the stock universe to include popular growth equities, as desired.
Dog Metrics Assembled Technology Stocks by Yield
Actionable Conclusion (1): Telecommunication Firms Still Tops For Tech Sector Yields
Ten stocks that showed the biggest dividend yields after December, per Yahoo Finance data, represented six technology sector industries: telecom services domestic; data storage; telecom services foreign; semiconductor-broad line; communication equipment; scientific & technical instruments.
Tops by yield were three of four telecom service-domestic firms: Windstream Corp. (NASDAQ:WIN) ; Frontier Communications (NYSE:FTR) ; CenturyLink Inc. (NYSE:CTL) . The other domestic telecom placed fifth, Consolidated Communications Holdings (NASDAQ:CNSL) .
Four technology firms in separate industries were singular representatives for their industries and placed fourth, seventh, eighth, & ninth: a lone Data Storage representative, Seagate Technology (NASDAQ:STX) ; STMicroelectronics NV (NYSE:STM)  for semiconductor-broad line firms; Comtech Telecommunications (NASDAQ:CMTL)  represented the communication equipment industry; finally, Garmin Ltd. (NASDAQ:GRMN) , made the list for scientific & technical instruments and completed the January technology top 10 dog list by yield.
Technology Sector Dividend vs. Price Results Were Comparable to The Dogs of the Dow
Relative strengths of the top 10 technology dogs graphed below by yield 1/2/2016 were likened to those of the Dow. Projected annual dividend history from $10,000 invested as $1k in each of the 10 highest yielding stocks and the total single share prices of those 10 stocks created the data points shown in green for price and blue for dividends.
Actionable Conclusions: (2) Technology Dogs Retreated As (3) Dow Dogs Did Likewise
As of January 12, dividend from $10k invested as $1k in each of the top 10 technology stocks climbed as aggregate single share price of those 10 tumbled. Price dropped 12% while dividend increased 7.3% to take a bearish path.
Dow dogs also retreated after December. Projected annual dividend from $10k invested as $1K in each of the top 10 rose 1.7%. At the same time, aggregate single share price plummeted 9% to confirm the retreat.
The Dow dogs' overbought condition (in which aggregate single share price of the 10 exceeded projected annual dividend from $1k invested in each of the 10) shrank again.
[I invite you to sign on to my premium site, The Dividend Dog Catcher, to share my discussion about how the Dow (short of tossing out IBM) could in one move return to a normal balance where dividends from 10 $1k investments can again exceed the aggregate single share price of those top 10 stocks.]
Actionable Conclusion (4): Dow Dogs Continue As Overbought
The overhang was $239 or 62% for February; widened to a record gap of $388 or 102% in March; shrank back to $291 or 79% for April; widened to $320 or 90% to begin May; soared to the new record $406 or 112% in June.
The Dow bubble deflated as Dupont replaced IBM in the 10 slot of the top 10 for July to peg the gap at $269 or 71%, then inflated again as IBM replaced Pfizer to widen the gap to $331 or 85% for August. September brought some sanity back to the runaway Dow when the gap stood at $279 or 67%. October increases in price by CVX and XOM pushed the gap to $334 or 85%.
November changed out MCD for WMT, and GE for KO. The resulting price over dividend gap went to $303 or 78%. As of December 4, the gap stood at $302 or 78%. Come January 12, prices of the 10 Dow top dogs fell, and dividends rose, to push the overbought gap down to $226 or 56%.
This gap between high share price and low dividend per $1k invested defines the Dow overbought condition. Meaning these are low risk and low opportunity Dow dog stocks.
In contrast to the Dow, technology dog charts show them to be higher risk but also higher gain potential pups than those of the Dow.
Wall Street Wizard Workings
One-year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment revealed 10 stocks showing the highest upside price potential into 2017 out of 30 selected by yield. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts have usually provided the most accurate mean target price estimates.
Actionable Conclusion: (5) Analysts Assert 36.39% Average Price Upsides For 10 Technology Dogs Come January 2017; (6) One Tech Dog Swooned 18.6%
To quantify top dog rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential. Added to the simple high yield "dog" metrics, analyst mean price target estimates provided another tool to dig out bargains.
Actionable Conclusions: Wall St. Wizards Cast (7) A 16.66% Average Upside; (8) A 17.2% Average 1 yr. Net Gain from Top 30 January Technology Dogs
Tech sector dogs were graphed below to show relative strengths by dividend and price as of January 12, 2016 and those projected by analyst mean price target estimates to the same date in 2017.
A hypothetical $1000 investment in each equity was divided by the current share price to find the number of shares purchased. The shares number was then multiplied by projected annual per share dividend amounts to find the dividend return. Thereafter the analyst median target price was used to gauge the stock upside to 2017.
Historic prices and actual dividends paid from $1000 invested in each of the 30 highest yielding stocks and the aggregate single share prices of those 30 stocks divided by 3 created the data points for 2016. Projections based on estimated increases in dividend amounts from $1000 invested in the 30 highest yielding stocks and aggregate one-year analyst target share prices from Yahoo Finance divided by 3 created the 2017 data points green for price and blue for dividends.
Analysts reported by Yahoo finance projected a 13.3% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 15.4% in the coming year. The number of analysts contributing to the mean target price estimate for each stock was noted in the next to the last column on the charts. Three to nine analysts have proven to provide more accurate projected estimates. Estimates provided by one analyst were not applied (n/a).
A beta (risk) ranking for each stock was shown in the far right column on the above chart. A beta of 1 meant the stock's price would move with the market. Less than 1 showed lower than market movement. Higher than 1 showed greater than market movement. A negative beta number indicated the degree of a stock price movement opposite market direction.
Actionable Conclusion (9): Wall St. Wizards Wish 10 Technology Dogs To Net 21.83% to 58.38% Gains by January 2017
Four of the 10 top dividend yielding technology dogs were verified as being among the 10 top net gainers for the coming year based on analyst 1-year target prices. So this period the dog strategy for technology stocks as graded by Wall St. wizards was 40% accurate.
Ten probable profit generating trades were revealed by Thomson/First Call in Yahoo Finance for January 2017:
Cypress Semiconductor (NASDAQ:CY) was projected to net $583.82, based on dividends plus a mean target price estimate from twelve analysts less broker fees. The Beta number showed this estimate was subject to volatility 67% more than the market as a whole.
China Mobile (NYSE:CHL) was projected to net $524.08 based on the median target price estimate from four analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 74% less than the market as a whole.
Brooks Automation, Inc. (NASDAQ:BRKS) was projected to net $505.42 based on dividends plus a median target price estimate by four analysts less broker fees. The Beta number showed this estimate subject to volatility 52% less than the market as a whole.
Frontier Communications was projected to net $445.75 based on estimates from fourteen analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 25% less than the market as a whole.
Windstream Corp was projected to net $438.73, based on dividends plus a median target price estimate from nine analysts less broker fees. The Beta number showed this estimate subject to volatility 21% opposite the market as a whole.
Seagate Technology was projected to net $406.04 based on estimates from twenty-two analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 12% more than the market as a whole.
Intersil Corporation (NASDAQ:ISIL) was projected to net $349.32 based on dividends plus the median of annual price estimates from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 60% more than the market as a whole.
Qualcomm, Inc. (NASDAQ:QCOM) was projected to net $311.04 based on estimates from thirty analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 45% more than the market as a whole.
LM Ericsson Telephone (NASDAQ:ERIC) was projected to net $266.80, based on dividends plus a median target price estimate from nine analysts less broker fees. The Beta number showed this estimate was subject to volatility 31% less than the market as a whole.
Garmin Ltd. was projected to net $218.01 based on estimated dividends plus median target price estimate from eleven analysts less broker fees. The Beta number showed this estimate subject to volatility 31% less than the market as a whole.
Average net gain in dividend and price was 36.54% on $10k invested as $1k in each of these 10 dogs. This gain estimate was subject to average volatility 25% less than the market as a whole.
Actionable Conclusion (10): (Bear Alert) Analysts Predicted One Technology Dog To Show A Net Loss of 16.5% By January, 2016
The probable losing trade revealed by Thomson/First Call in Yahoo Finance in 2016 was:
Quality Systems (NASDAQ:QSII) was projected to lose $165.35 based on dividend and a median target price estimate from 12 analysts including $20 of broker fees (which the dividend more than covered). The Beta number showed this estimate subject to volatility 12% less than the market as a whole.
Dog Metrics Extracted More Bargains From Five Lowest Priced Highest Yield Technology Stocks
Ten monthly pay stock equities were culled by yield from here. Yield (dividend/price) results verified by Yahoo Finance did the ranking.
Top 10 technology sector dogs showing the biggest dividend yields by this screen as of January 12, 2016 represented six technology sector industries: telecom services domestic; data storage; telecom services foreign; semiconductor-broad line; communication equipment; scientific & technical instruments.
Actionable Conclusions: (1) Analysts Assert 5 Lowest Priced of 10 Highest Yield Technology Dividend Dogs Deliver 23% vs. (2) 21.75% Net Gains by All 10 as of January 12, 2017
$5000 invested as $1k in each of the five lowest priced stocks in the top 10 technological dividend kennel by yield were predicted by analyst 1-year targets to deliver 5.77% more net gain than $5,000 invested as $.5k in each of all 10. The very lowest, Frontier Communications, was projected to deliver the best net gain of 44.58%.
Lowest priced five technology dividend dogs for January 12 were: Frontier Communications; Windstream Corp; STMicroelectronics; Nortel Inversora S.A.; Comtech Telecommunications, with prices ranging from $4.38 to $18.76.
Higher priced five Technological dividend dogs for January 12 were: Consolidated Communications Holdings; CenturyLink Inc.; Seagate Technology ; Garmin Ltd.; Philippine Long Distance Telephone Co., whose prices ranged from $20.26 to $40.82.
This distinction between five low priced dividend dogs and the general field of 10 reflects the "basic method" Michael B. O'Higgins employed for beating the Dow. The same technique, you now see, can also be used to find the more rewarding dogs in the Financial sector.
The added scale of projected gains based on analyst targets contributed a unique element of "market sentiment" gauging upside potential. It provided a here and now equivalent of waiting a year to find out what might happen in the market. It's also the work analysts got paid big bucks to do.
A caution is advised, however, as analysts are historically 20% to 80% accurate on the direction of change and about 0% to 20% accurate on the degree of the change.
Net gain and loss estimates above did not factor-in any foreign or domestic tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.
Stocks listed above were suggested only as possible starting points for your Technology dog dividend stock purchase/sale research process. These were not recommendations.
See my instablog for specific instructions about how to best use the dividend dog data featured in this article.
Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.
Disclosure: I am/we are long GE, PFE, VZ.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.